The CMA said the probe will focus on why the largest companies still turn almost exclusively to one of the Big Four firms when selecting an auditor, and whether the firms are “too big to fail”. It will also address concerns that companies, rather than investors, pick their own auditors and whether this could result in a lack of incentive to produce challenging performance reviews.

If it finds evidence that the market is not working well in these areas, the authority added, it will “scrutinise all proposals for tackling them”.

CMA chairman Andrew Tyrie, said, “If the many critics of the audit process are right, it is not just the companies which buy audits that lose out; it is the millions of people dependent on savings, pension funds and other investments in those companies whose audits may be defective.

CMA chief executive Andrea Coscelli said the authority plans to “move swiftly” and issue its provisional findings before Christmas.

To do so, it will consult stakeholders, including the Financial Reporting Council.

Michael Izza, ICAEW chief executive, said the review is a “very positive development” and that the accountancy profession “as a whole will welcome it.”.

“It will need to coordinate closely with other processes already under way, such as the review of the operation of the FRC by Sir John Kingman, and the initiatives set out yesterday by the FRC itself. However, it is vital that we rebuild public trust in audit – the success of UK business depends on it,” added Izza.

An FRC spokesperson said, “We have expressed concern about concentration at the top of the audit market so we welcome this announcement.

“We will work closely with the CMA as they carry out this study. It is essential that there is widespread confidence in the quality of company audit in UK.”